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Business Model Options for Antibiotics

Learning from Other Industries

Ella Jaczynska

Kevin Outterson

Jorge Mestre-Ferrandiz

February 2015

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© The Royal Institute of International Affairs and the Big Innovation Centre, 2015

Chatham House (The Royal Institute of International Affairs) is an independent body

which promotes the rigorous study of international questions and does not express

opinions of its own. The opinions expressed in this publication are the responsibility

of the authors.

Launched in September 2011, the Big Innovation Centre brings together a range of

companies, universities and public bodies to research and propose practical reforms

with the ambition of making the UK a global open innovation hub as part of the

urgent task of rebalancing and growing the UK economy and with the vision of

building a world-class innovation and investment ecosystem by 2025.

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CONTENTS

Summary.....................................................................................................................4

1 Introduction ............................................................................................................... 6

2 Business Models from Other Industries ..................................................................... 10

3 Funding-design Options ............................................................................................ 11

4 Process-design Considerations .................................................................................. 20

5 How Could This All Work as a System? ...................................................................... 31

6 Areas to Explore Further and Recommendations for Further Programmes ................. 36

7 Summary and Conclusions ........................................................................................ 38

Acknowledgments .......................................................................................................... 40

About the Authors...........................................................................................................

Appendices available at:

www.biginnovationcentre.com/publications

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Summary As resistance to antibiotics continues to grow, there is a well-recognized misalignment

between the clinical need for new antibiotics and the incentives for their development. The

returns from investment in antibiotics research and development (R&D) are perceived as

too small. Partly as a result, the number of large multinational companies researching

antibiotics has fallen drastically in the past 20 years and few high-quality antibiotics have

been developed.

In looking at the antimicrobial resistance (AMR) situation, we were aware that other

industries have faced conceptually similar challenges and that they might offer helpful

lessons and possible solutions that could be adapted to the problems of antimicrobial R&D.

Our focus was particularly on learning about models in which the incentive for R&D is

delinked from the volume of sales.

A Big Innovation Centre and Chatham House workshop brought together on 1 September

2014 six companies that are members of the Big Innovation Centre: BAE Systems (defence),

Allianz (insurance), Barclays Bank (finance), EDF Energy (energy), Dun & Bradstreet

(corporate information) and Knowledge Unlatched (academic publishing). These companies

presented business and incentivization models they had implemented or devised that could

be explored further for their applicability to antibiotics R&D. It was made clear to them that

any models shared might be adapted so that they a) provide the pharmaceutical industry

with an incentive to invest in antibiotics R&D, b) offer insight to health services about how

to fund and to maintain the availability of appropriate antibiotics and c) ensure that both

new and existing antibiotics are used appropriately and wisely.

Learning from other industries has been a very fruitful exercise. They have offered a

different perspective on how to tackle the AMR issue and have provided relevant analogies

to consider.

This research report offers a number of innovative models and ideas that address many of

the critical questions facing policy-makers in the EU and the US as they seek solutions. It

also contributes to key new initiatives globally and in Europe and the US specifically,

including the World Health Organization’s Global Strategy on AMR, the Innovative

Medicines Initiative DRIVE-AB project in the EU, the UK’s Review on Antimicrobial

Resistance and, in the US, the President’s Advisory Council and the National Strategy for

Combating Antibiotic-Resistant Bacteria.

This report highlights important lessons about how these other industries have adapted to

diverse challenges in their environment. Based on this work and on our own review over the

past few months, we see a clear need for a ‘bucket’ of various funding mechanisms that can

exist in parallel. There should be separate funding mechanisms in place during the R&D

phase of developing an antibiotic and a different mechanism to fund the maintenance,

delivery and distribution of the antibiotic after regulatory approval.

The report articulates three essential messages:

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1) Global collaboration is required on a scale not seen before in relation to

antimicrobial resistance. Many independent initiatives are under way nationally and

regionally, but they need to be brought together in a concerted worldwide effort to

engage on a global scale. The report is designed to help bridge these various efforts

and move towards consensus on global action. We propose four initiatives:

a. Creating a global antibiotics public–private partnership (GAPPP). A GAPPP

should involve private companies, academic institutions and public bodies. It

must be a sustainable, independent and self-funding operation with a focus

on the research and early development of antibiotics in response to

identified global public health needs.

b. Creating a global antibiotics fund (GAF), which would be set up to be an over-

arching umbrella fund (potentially consolidating all the pre-existing small

funds that exist globally). It could exist alongside or in collaboration with

major existing funding sources, such as BARDA and IMI, that have very pre-

defined targets for funding.. A GAF would provide monetary support to a

GAPPP in order to enable its R&D effort. A GAF would work with existing

funders for better awareness of the work each is supporting and for

collaboration in funding priorities, options and courses of action. Ultimately,

proposals for a GAPPP and a GAF are a possible way forward to pool skills,

resources and funding so as to ensure a sustainable long-term solution.

c. Exploring the Gavi (the Vaccine Alliance)-type model and determining

whether or not an independent global body should serve as the global

procurement and distribution entity for antibiotics.

d. Becoming better stewards of antibiotics, as they are valuable drugs.

Otherwise, boosting the production of new antibiotics will be futile.

Antibiotics must be used appropriately everywhere around the globe. A

worldwide effort to conserve them and to ensure appropriate access and use

requires international coordination and the participation of every country.

Some form of an international treaty or framework agreement is called for.

2) There is a need to explore ‘service-availability’/’option-to-use’ types of

agreements/contracts between developers/manufacturers and health care systems

as a means to support the ‘delinkage’ concept. As in the defence sector, products are

developed but kept on the shelf, maintained and ready when needed, including all

the services to deliver them effectively and efficiently. Long-term contracts with

customers ensure that the services they require are available when needed.

Innovators of new antibiotics should not be rewarded with the traditional ‘price x

volume’ model but should focus more on delivering the product, resources and

services when needed. Governments would pay an annual ‘service-availability’

fee/premium delinked from the volume of sales. Lessons from the insurance industry

indicate how these annual ‘premiums’ could be calculated.

3) There is a need to engage customers (in the broadest sense) and ensure that the

right incentives, both financial and non-financial, are aligned from the bench to the

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bedside. We should not focus on incentives just for the pharmaceutical companies;

we must include prescribers, health systems, patients and all other stakeholders.

1 Introduction

As resistance to antibiotics continues to grow, there is a well-recognized misalignment

between the clinical need for new antibiotics and incentives for their development. The

returns from investment in antibiotics research and development (R&D) are perceived as

too small: prospective sales revenues are judged unlikely to cover the cost and risk of

investing in R&D.1 And the attempt to restrict the use of antibiotics in order to counter the

spread of resistance further reinforces this negative perspective.2 As a result, the number of

large multinational companies researching antibiotics has fallen drastically in the past 20

years and few new antibiotics have been developed.3 Apart from the poor economic return,

there are specific scientific challenges to developing antibiotics. Recently, however, there

has been improved dialogue among stakeholders about regulatory requirements and how

they can be adapted for new antibiotics, and discussions are continuing. But there is some

concern that current regulatory requirements may compound the problem of inadequate

returns.

As sales of new antibiotics are likely to be restricted, particularly when an antibiotic must be

held in reserve, incentives for R&D need to be considered that do not depend on sales

volumes and revenues.4 Many groups are now seeking solutions to this problem. Given the

seriousness of this issue for global health and the active engagement of many healthcare

stakeholders, we thought it wise to expand the scope of inquiry and look for guidance

beyond the boundaries of the pharmaceutical industry. Our thought was that other

industries have faced conceptually similar challenges and might offer helpful lessons and

solutions that could be adapted to the problems of antibiotics R&D. There was particular

interest in learning about models in which the incentive for R&D is delinked from the

volume of sales.

Acting on this premise, the Big Innovation Centre and Chatham House held a workshop in

London on 1 September 2014 with presentations from six companies that are members of

the Big Innovation Centre: BAE Systems (defence), Allianz (insurance), Barclays Bank

(finance), EDF Energy (energy), Dun & Bradstreet (corporate information) and Knowledge

Unlatched (academic publishing).

1 Sertkaya, A., Eyraud, J., Birkenbach, A., Franz, C., Ackerley, N., Overton, V. and Outterson, K., Analytical

Framework for Examining the Value of Antibacterial Products, Eastern Research Group, April 2014. Available at http://aspe.hhs.gov/sp/reports/2014/antibacterials/rpt_antibacterials.cfm. 2 Kesselheim, A.S. and Outterson, K., ‘Improving antibiotic markets for long-term sustainability’, Yale Journal of

Health Policy, Law and Ethics, 2011, 11(1): 101–67. 3 Boucher, H.W., Talbot, G.H., Bradley, J.S. et al., ‘Bad bugs, no drugs: No ESKAPE! An update from the

Infectious Diseases Society of America’, Clinical Infectious Diseases, 2009, 48(1): 1–12. 4 Outterson, K., Powers, J.H., Daniels, G.W. and McClellan, M.B., ‘Repairing the broken market for antibiotic

innovation’, Health Affairs, 2015, 35(2): 277–285.

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The companies were given some background on the current problem but no further

prompting, in the hope of innovative solutions arising from the experience of the different

industries. It was specified that the models explored needed a) to provide the

pharmaceutical industry with an incentive to invest in antibiotics R&D, b) to provide insight

to health services as to how to fund and to maintain the availability of appropriate

antibiotics and c) to ensure that both new and existing antibiotics are used appropriately

and wisely.

We were not disappointed. The report offers a number of innovative models and ideas that

address many of the important questions facing pharmaceutical policy-makers in the EU and

the US as they seek solutions. It tackles not only funding models but also organizational

infrastructure, collaboration and process models across public–private partnerships (PPPs).

Some of the proposals are novel; others build on existing fund and partnership models and

ideas in ways that could be globally applicable and relevant. We focus on the EU and the US

because we believe that they are pivotal in terms of offering incentives for innovation

although the challenge of promoting appropriate access and use is global in scope.

The purpose of this report is to make a contribution to major new initiatives globally and in

Europe and the US specifically, including the Innovative Medicines Initiative (IMI) DRIVE-AB

project in the EU,5 the UK’s Review on Antimicrobial Resistance,6 the US President’s

Advisory Council, the World Health Organization’s (WHO) Global Strategy on AMR7 and the

US National Strategy for Combating Antibiotic-Resistant Bacteria (CARB).8 To this end, the

report addresses key research questions and proposes areas in which further work and

modelling, testing and validation are needed. It identifies gaps that were noted and how

they could be addressed.

Background to the problem

The economic model underpinning R&D for antibiotics and sales is more problematic than

for other classes of drug. In order to obtain a return for the major sums invested in

developing a new antibiotic, pharmaceutical companies must sell as many antibiotics as

possible. A pharmaceutical company’s revenue is the number of units of antibiotics sold

multiplied by their price. When government sets the price, the only way to increase revenue

is to sell more antibiotics. But higher sales of antibiotics increase the likelihood of

accelerating the development of resistance.

For most other classes of drug, a powerful new drug will realize significant sales in early

years. For antibiotics, stewardship measures will increasingly restrict the uptake of new

drugs until the older ones lose their efficacy. And higher prices are not a plausible option for

5 DRIVE-AB, Driving reinvestment in research and development and responsible antibiotic use. Available at

http://drive-ab.eu/about/. 6 Review on Antimicrobial Resistance. Available at http://amr-review.org/.

7 World Health Organization, Antimicrobial resistance, Geneva, Switzerland, 24 May 2014 [cited 23 December

2014], Sixty-seventh World Health Assembly, WHA67.25, Agenda item 16.5. Available at http://apps.who.int/gb/ebwha/pdf_files/WHA67/A67_R25-en.pdf. 8 See http://www.whitehouse.gov/sites/default/files/docs/carb_national_strategy.pdf.

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increasing returns for antibiotics.9 Important concerns about this approach include the

impact on health service budgets and consequent complaints from payers, accessibility in

low- and middle-income countries and the fact that high prices for a small, targeted

population may be insufficient to raise the return on investment to the needed level.

Although some conventional measures are being tried, such as increasing direct public-

sector investment in R&D and making efforts to streamline the regulatory pathway,10 they

are unlikely to be enough. In particular, systemic changes are needed in the ways that R&D

investment is rewarded. Research undertaken in recent years shows that antibiotics are

woefully undervalued relative to their importance to society: the health and economic

benefits to society generated by the use of antibiotics vastly exceed their cost.11 Innovative

commercial models are required that drive investment in R&D by providing a viable,

sustainable return while preserving and extending the utility and responsible use of

antibiotics.12,13 The proposals in this report focus specifically on options for ‘delinkage’, ones

that reward companies for R&D on a basis other than price and sales volumes. They also

look beyond the single-company approach and include novel methods of collaboration for

driving R&D forward.

In the US, a recent report commissioned by the government from the Eastern Research

Group (ERG) examined economic incentives for the development of antibiotics.14 The

report’s econometric analysis demonstrated that in the absence of additional incentives, the

expected return on investment in R&D for the six bacterial infections studied was

inadequate.

The ERG report also examined intellectual property (IP) incentives such as patents and

marketing exclusivities; streamlined clinical trials; reductions in the cost of capital such as

tax credits; and cash flow awards such as contracts, grants and prizes. Owing to the

powerful effect of discounting on distant future benefits, IP incentives always failed in this

model to achieve a minimum return on investment. Reductions in the cost of capital would

need to be quite substantial, on the order of 50–70 per cent. Reductions in clinical trial

development times would need to be improbably radical, in many cases cutting them by 75

per cent.

9 Love, J., ‘Prizes, not prices, to stimulate antibiotic R&D’, Science and Development Network, 26 March

2008. Available at http://www.scidev.net/en/opinions/prizes-not-prices-to-stimulate-antibiotic-r-d-.html. 10

Rex, J.H., Goldberger, M., Eisenstein, B.I. and Harney, C., ‘The evolution of the regulatory framework for antibacterial agents’, Annals of the New York Academy of Sciences, 2014, 1323: 11–21. 11

O’Neill, J., ‘Antimicrobial resistance: Tackling a Crisis for the Health and Wealth of Nations’, The Review on Antimicrobial Resistance, 11 December 2014. Available at http://www.jpiamr.eu/wp-content/uploads/2014/12/AMR-Review-Paper-Tackling-a-crisis-for-the-health-and-wealth-of-nations_1-2.pdf. 12

Outterson, K., New business models for sustainable antibiotics, Chatham House, February 2014. Available at http://www.chathamhouse.org/sites/files/chathamhouse/public/Research/Global%20Health/0214SustainableAntibiotics.pdf. 13

Clift, C., Gopinathan, U., Morel, C., Outterson, K., Røttingen, J.A. and So, A., eds, Report of the Chatham

House Working Group on New Antibiotic Business Models, Chatham House, February 2015 (forthcoming). 14

Sertkaya, A., Eyraud, J., Birkenbach, A. et al., Analytical Framework for Examining the Value of Antibacterial Products. Available at http://aspe.hhs.gov/sp/reports/2014/antibacterials/rpt_antibacterials.cfm.

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According to the ERG report, the most effective incentives by far are cash flow awards

spread across a product’s life cycle, including payments during clinical trials as well as

enhanced reimbursement once a product gets regulatory approval (post-approval). The

model suggested that a cumulative aggregate of awards would need to be in the range of

US$1 billion in order to incentivize the development of one successful new antibiotic.

For Europe, Towse and Sharma carried out a similar exercise, with similar results in terms of

expected rates of return without additional incentives.15 Their baseline net present values

(NPVs) were negative for all antibiotics projects studied. They modelled the size required of

various incentives, including direct funding for R&D, IP, higher prices and an advanced

market commitment (AMC), in order to raise the NPV to a more acceptable level. They

recommended a combination of cash flow incentives, reducing R&D costs and some kind of

priority review, both at the stage of regulatory approval and when setting pricing and

reimbursement levels. A suggested alternative package (not mutually exclusive with the first

recommendation) could include an upfront payment for registration (rather than for volume

of use) in the form of an AMC ‘prize’, akin to the ‘delinkage’ concept mentioned above. Two

versions were modelled: a one-year AMC in which the award is given as a lump sum to the

developer at launch and a five-year AMC in which the award is given to the developer over

five years after launch. The necessary prize levels to bring the prospective economic return

to an acceptable level were €985 million and €1.4billion (€280 million per year) respectively.

It should be noted that many existing incentive packages offer cash flow awards prior to

approval of the drug (pre-approval), including grants for basic research from medical

research councils or foundations and contracts for clinical development, such as from the

IMI in Europe and the Biomedical Advanced Research and Development Authority (BARDA)

in the US. The data support an expansion of these efforts, as recently recognized in Europe

with the establishment of the New Drugs 4 Bad Bugs (ND4BB) programme under IMI and by

the White House when it expanded BARDA’s mission and recommended a significant

expansion of its funding.16 In this report, we propose an expansion in the size of these cash

awards, as well as an expansion of their scope. Identified problems with reimbursement for

antibiotics suggest that these efforts should include delinked post-approval payments too.

This is also a focus of the DRIVE-AB project.

Some of the models in this report are further examples of types of cash award. They build

on work and proposals made in the US and the EU, with the aim to help us specify model

parameters more clearly.

15

Towse, A. and Sharma, P., Incentives for R&D for New Antimicrobial Drugs, Office of Health Economics, April 2011; available at https://www.ohe.org/publications/incentives-rd-new-antimicrobial-drugs and Sharma, P. and Towse, A., New Drugs to Tackle Antimicrobial Resistance: Analysis of EU Policy Options, April 2011. Available at https://www.ohe.org/publications/new-drugs-tackle-antimicrobial-resistance-analysis-eu-policy-options. 16

Available at http://www.whitehouse.gov/the-press-office/2014/09/18/fact-sheet-obama-administration-takes-actions-combat-antibiotic-resistan.

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2 Business Models from Other Industries Table 1 below summarizes the business models presented at the Workshop along with a

topline description of how each could be applied to antibiotics. Details of the business

models from the six different industries are described further below and in Appendix 2.

Table 1: Business models from other industries

Company Industry Model name Description Application

Allianz Insurance Pandemic insurance

a) New policy, in which premiums are collected and spent to create antibiotics and help to prevent bacterial epidemics resulting from resistance to current antibiotics

b) Catastrophe insurance

Funding, underwriting and risk-spreading mechanism at the national level; also indicates the value of avoiding pandemics

BAE Systems

Defence Long-term availability

Some defence procurement has shifted from simple product delivery (e.g. a ship) to long-term availability and service provision (a ship, maintained with levels of availability for decades).

Society needs antibiotic drug classes to be available and effective for generations; moves from a simple product to a long-term service

Barclays Bank

Finance Antibiotic corporate bond (ACB)

Public entity sells 10-year bonds; net proceeds are used to fund antibiotics R&D; repayment comes from sales of wildcard patent certificates granted for successfully approved antibiotics.

A financing mechanism for antibiotics R&D that is detached from the sale of antibiotics; external investors are also rewarded. The repayment portion shifts much of the cost on to other areas of the health sector or to other potential sectors. Need to model system so as to understand and overcome concerns about efficiency and fairness.

Dun & Bradstreet

Corporate information

Value-based sales

D&B has moved from revenues built on unit sales to bundled products priced on value.

Antibiotics need to be reimbursed more in line with value. Delinking revenue from sales volume could reduce the rate of resistance and reduce uncertainty for developers and healthcare systems.

EDF Energy Conservation incentives

Utilities need to boost customer conservation in order to meet climate change goals but customers do not adopt energy-savings measures without direct financial incentives; companies need a mechanism by which to create equal conditions among companies for these costs.

Antibiotics companies need to incentivize their customers to use less of their products; financial incentives might be necessary; government might need to require proportionate efforts by all companies (branded and generic) to prevent free-riding.

Knowledge Unlatched

Academic publishing

Collaboration Instead of creating books that are then sold to customers (academic libraries), collaborate with customers to

Antibiotics have high fixed costs and low marginal costs; collaboration with customers (governments) could make the

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collect upfront revenues that are then used to fund open-access e-books to be shared without marginal costs.

market much more predictable.

In the sections that follow, we divide the results and proposals from the Workshop into two

categories, distinguishing between funding-design options and process-orientated

considerations:

Funding-design options: how funding could be collected and spent at various points

in the life cycle of an antibiotic (see Section 3) and

Process-design considerations: management lessons for transforming the antibiotics

business model (see Section 4).

Throughout the report, we give our view about which key programmes and initiatives, such

as DRIVE–AB, the UK’s Review on AMR, the US National Strategy CARB group and the WHO

Global Action Plan, could take up these recommendations and work with them.

3 Funding-design Options

The focus of funding-design options is on the whole life cycle of a new antibiotic, i.e.

including pre-approval and post-approval. It is important to keep in mind that various

funding mechanisms may support different parts of the life cycle. Numerous funding options

must be available in order to allow a flexible menu of options. But the first questions are

whether or not funding should come from a stand-alone fund and whether or not that fund

should be self-sustaining.

Stand-alone sustainable funds An important design choice for any proposed funding scheme is whether or not it requires

support from a stand-alone, self-sustaining fund. Although a significant amount of funding is

available globally to support R&D into antibiotics, many funds are not self-sustaining.

Insecurity in the funding stream causes companies to discount projected future cash flows

for political risk, which decreases the efficiency of any incentive scheme. It has been shown

across many industries that the stronger the political support is, the more companies

believe there is a credible commitment and thus the more willing they will be to invest.

The current crisis in antibiotics has taken decades to emerge, and AMR will need to be

addressed continually over further decades, in view of which the funding solution must be

stable over long periods of time. Moreover, a regular stream of new antibiotics is required

to replace the old ones as resistance builds. The time lag from bench to bedside is at least a

decade and sometimes much longer. Human capital, such as university research teams,

physicians, scientists, expertise in the private sector specializing in infectious diseases, and

clinical trial networks, cannot be rebuilt quickly and it needs long-term stability. It is

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essential, therefore, to have a scheme that supports a long-term, self-sustaining fund. A

scheme needs to support the development of many products so that the development risk

is spread more widely (the optimal number of antibiotics required both in the market and in

development is unknown). The target products must include diagnostics, vaccines, infection-

control technologies and biopharmaceuticals in addition to traditional antibiotics.

At the Workshop, the six companies described their revenue models, with particular

attention to how their experience might help to provide sustainable funding for antibiotics

markets. The proposals in the report take this need into account.

R&D funding models Although efforts have been made to increase funding through public–private partnerships

(PPPs), the success rate of antibiotics (e.g., 72 leads required to generate one product

launch compared to 15 on average for other therapy areas)17 indicates that without

significant further incentives, the supply of new ones will remain thin.18 Numerous funding

models need to exist in parallel so as to fund the cost of research and early development, to

reduce the risk of this investment and to encourage re-entry into this area.

Insurance model

Allianz made two proposals. The first proposal discussed using insurance premiums from a

specific newly created, individual antibiotic insurance cover (see Appendix 2 for details) to

create a funding pot that is then used to help assure the continued availability of effective

antibiotics. The second proposal offered models of Allianz’ catastrophe insurance policies

that could be applied to a bacterial epidemic or pandemic. The insurance-type model makes

funding very predictable over time through the well-known mechanism of annual insurance

premiums. Making these commitments over many years, perhaps over decades, would level

out the cost of premiums even more. This funding pot would be provided in part to

pharmaceutical companies and research organizations to fund development costs. The

authors of this report, along with some participants in the Workshop, modified the

individual antibiotic insurance cover proposal in order to source premiums from

governments as opposed to individuals.

If antibiotics R&D is viewed as an insurance premium, governments could invest sizeable

funds (for example, €1–2 billion/year in the EU, in line with the prize-level amounts the

research has shown are needed) to prevent the catastrophic consequences of a post-

antibiotics era. Governments, businesses and individuals understand that insurance is a

financial mechanism to prepay for the assumption and distribution of risk. Catastrophe

insurance policies show how annual premiums can be calculated to ensure that adequate

funding is collected in the upfront years in order subsequently to cover all the costs of

17

Based on Paul et al., ‘Hit to Phase 2 based on novel mechanism AB discovery (GSK)’, Nature Reviews Drug Discovery, 2010 (9): 203–14. 18

We acknowledge that just increasing further funding on R&D (either public or private or both) will not necessarily increase the rate of success and reduce risk. As stated throughout this report, other initiatives are required.

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delivering the antibiotic and all the required support and services when there is a crisis. This

links with the discussion of post-approval funding models below. If insurance-type schemes

were put in place, they would need to be set up as soon as possible so as to allow the

system to accumulate the annual premiums over the years when no catastrophe has

occurred. This would enable companies to further inject funds into the development of new

antibiotics and to have adequate funds to put manufacturing and distribution in place in the

event of a pandemic or a regional resistance crisis.

Corporate bond funding model

The Barclays model was based on its expertise in designing financial products for customers.

Its proposal was the issuance of 10-year government-guaranteed corporate bonds

(antibiotic corporate bonds or ACBs), repaid from the sale of patent-extension certificates

(PECs). Antibiotic corporate bonds would be sold by an independent agency, possibly a

quasi-governmental entity, to generate a research fund. That fund would be used to pay for

R&D of antibiotics across their life cycle to many entities, including academic groups, small

and medium-sized enterprises (SMEs) and large pharmaceutical companies.

A PEC would be generated when regulators approve a new antibiotic for marketing. PECs

would be saleable and transferable and may be sold to the highest bidder, allowing the

successful bidder to extend a patent on an existing medicinal product within its portfolio by

up to three years. As patents are a national system, the complex logistics and feasibility of

making this model work globally may be difficult.

The model sets a controversial precedent in breaking the direct link between investment in

innovation and the award of patent rights for any inventions that arise, although it does

sustain a link between innovation and reward more generally. In the UK, it has been

highlighted that patent-extension certificates could be applied not only to the

pharmaceutical sector but also to various industries if that were decided to be appropriate

and beneficial. In the US, breaking the direct link might raise serious legal issues under the

US Constitution.

The funds generated from the sale of PECs would provide a revenue stream that is

disconnected from the sale of the new antibiotic coming to market. Some, including the

authors of this report, consider the PEC proposal to be a controversial idea on grounds of

fairness, efficiency and political reality.

It is necessary to determine the costs to a national health system that a PEC could generate

and then to model how those costs could be offset. In the corporate bond model, the PEC is

funded essentially through national public budgets and private health budgets. But only a

fraction of the costs to the system are spent directly on the targeted R&D; the balance goes

to transaction and financing costs associated with the bond issue.

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Some groups have raised concerns that stand-alone transferable patent-extension

certificates are not ethical, as the patent extension being applied to another medicine in a

different disease area means that part of the health system and those health insurance

payers will pick up the cost of the antibiotic reward.19 In the EU, this may be less salient

because whatever the disease area, the cost is picked up by national health services. In the

US, this cost is split among government, private insurers and paying individuals, and thus

there is a need to determine how the impact of a PEC on them could be reduced.

Wildcard patent schemes have been proposed in the US and Europe several times over the

past decade. They have never gained substantial political acceptance because they

represent a fundamental change in the patent system. Patents always reward innovation

with exclusivities over that invention. Wildcards break that essential link, awarding

exclusivities on another product that bears no relationship to the invention. On this basis,

there may be significant barriers, especially in the US, that would greatly limit the appeal of

the scheme. The specifics of these barriers need to be researched further, and whether or

not there are ways to overcome these barriers must be explored too.

As indicated above, there are known difficulties with the PEC system and with making this

repayment mechanism work globally. It is important here to look at other mechanisms for

how an antibiotic corporate bond could be repaid, to understand the issues those

mechanisms raise and any ways they can be overcome or addressed in this or other

repayment mechanisms and to ensure that any system is efficient, has more benefits than

funding antibiotics directly and offsets the potentially unpredictable consequences for

healthcare budgets of a wildcard extension and associated transaction costs.

Within the ACB–PEC model proposed by Barclays Bank, attempts were made to address

some of the concerns raised about PECs by ensuring that they are intrinsically part of an

overall scheme that feeds back into further research and support for the antibiotics

development ecosystem and that an independent agency would administer the sale and

collection of the funds from a sale of the various PECs with clear governance criteria.

A further proposal from Barclays Bank was that some of the funds generated from the PEC

sale could also go towards offsetting some of the impact of the patent extension in the

different disease area that the patent extension is applied to. The extra funding could be put

towards paying for programmes in the other disease areas where the patent has been

extended, i.e. to support research into further improving patient outcomes and further

reducing the cost of treating and supporting patients. The efficiency and fairness of this

scheme should be evaluated and modelled against direct funding options. Alternative bond

repayment mechanisms could also be explored within this model, such as direct payments

by governments or health systems.

19

Outterson, K., Samora, J.B. and Keller-Cuda, K., ‘Will longer antimicrobial patents improve global public health?’, The Lancet Infectious Diseases, 2007 (7): 559–66.

15

The feedback from the Workshop was that in order to make a funding model such as this

work, an independent, supranational organization would be required to administer it, for

example a central global administrative fund. This would be necessary for various reasons,

one being that individual national coordination and multiple national patent-extension

certificates would not be a feasible approach. The independence of a global third-party

administrator would be vital.

Post-approval funding models Some of the funding options considered were deemed to be more appropriate once an

antibiotic had been approved for marketing or once a package of antibiotics had become

available. There is a requirement to ensure that any future business model for antibiotics

also addresses incentives and accountabilities for maintaining the approved antibiotic, for

delivery and for any services contracted for that may aid deployment, stewardship and

delivery when needed.

BAE Systems and Dun & Bradstreet shared examples of ways in which they moved from

selling products to setting up ‘availability’ agreements with customers, payers and

governments. These agreements include the provision of value-adding services. This shift in

model could be uniquely appropriate for antibiotics: products are developed but kept on the

shelf, maintained and ready when needed, including all the services to deliver them

effectively and efficiently. Long-term contracts with customers ensure that the services they

require are available when needed.

‘Service-availability’ contracts model BAE Systems has a funding model that is secured from national defence budgets under a

contract for delivery of a service, which can include a portfolio of products and services. The

UK defence industry has contractor-logistics-support contracts with its primary customers

(governments). The US equivalent is a performance-based logistics contract. They have been

called ‘contracting for availability’.20 This is the defence industry’s version of an option-to-

use contract in which a contractor is remunerated on the basis of service performance in

view of the user’s desired needs rather than for selling a specific product. For example, what

is sold will be not just the ship but also the services of a ship, and the necessary ancillary

support over a period of years may also be contracted. Remuneration is determined

through a set of agreed key-performance indicators (KPIs). A simple example of a KPI would

be the number of aircraft in a fleet ready for service at any one time. However, KPIs can be

tailored for many different forms of availability.

As defence is a core national task of government, this funding mechanism is seen as reliable

over the long term. But it was also mentioned that given the long development time frames,

’goalposts’ can be changed by governments, which increases uncertainty for companies.

Although core healthcare and defence budgets are fairly protected from political pressures,

20 ‘Contracting for availability’ is an output-focused commercial arrangement that incentivizes improvement in asset availability rather than the traditional sale of products and spares and repairs.

16

the detailed funding for antibiotics R&D does not enjoy the same protection. A possible

exception (or a future way in which to ensure it) is ‘global health security’: funding that

emphasizes the security aspects of strategic health spending. Much of the White House’s

recent efforts on AMR have been coordinated with the National Security Council, in

recognition of the importance of ensuring US security.

The setting up of these contracts must be considered during the development of the

product, not just after approval, in order to allow for clarity on exactly what the ‘product’ to

be developed should be. These contracts should also avoid some of the well-known

weaknesses with defence procurement, including cost overruns and management

difficulties. Achieving these goals for antibiotics will require much further work.

Dun & Bradstreet sells corporate information, primarily to help companies make credit

decisions. Historically customers paid on a piecemeal basis for each credit report. Its new

revenue model requires shifting customers from a pay-as-you-go basis to paying for annual

access to its databases and reports, and thus revenue has been delinked from the volume of

use. Customers now pay for value, for access to valuable intelligence and information rather

than for units (reports). Dun & Bradstreet needed to make this transition to a delinked

revenue model quickly, as it saw looming competition from new internet platforms. For

antibiotics, the threat is resistance rather than competition, but the urgency is similar.

Pre-purchase collaborative-marketing model Knowledge Unlatched presented a model in which funding commitments to pre-purchase

academic electronic books (e-books) were secured from academic libraries in advance on a

project-by-project basis. Although these agreements are relatively short term in character,

the funding is collaborative and more secure than existing alternatives for academic

publishers. This collaboration has resulted in a reduction of costs for libraries thanks to

shared costs, and publishers have had their costs covered and risks shared. This revenue

model emphasizes the power of long-term relationships with customers (academic libraries)

for a portfolio of products (academic e-books). Given the severe revenue constraints

throughout academic publishing, any new source of funding was entirely welcome.

A key lesson here for antibiotics research and development might be (the value of)

collaborative relationships with customers (here the libraries), enabling them to have a

strong voice in what products come to market. Also, creating a ‘central’ fund set up and

managed by a third party to pay for the e-books whereby libraries each pay a fixed fee per

book was deemed to be essential. The advantage of wider engagement is also seen in

achieving reduced prices per book as more libraries join the scheme. The analogy for

antibiotics is that there is a need for collaboration among countries to contribute to the

‘central’ pot and that the more countries that join, the lower the payment required per

country. Antibiotics, like academic e-books, have high fixed costs and low marginal costs.

The changes that BAE Systems and the defence industry underwent in order to enable

‘service-availability’ contracts also fit a pre-purchase collaborative-marketing model. The

members of the industry needed to work together and move to this model of agreement

17

with their key customers; they could not deliver the capabilities needed and the products on

their own. Companies that did not embrace this collaboration and way of working from the

outset soon realized that they would be disadvantaged. Furthermore, the expense of the

products means that governments may partner with other countries to produce a product.

In consequence, national industries can end up partnering on programmes. The

combination of partners on a product may mean that a partner on one product could be a

competitor on another. For example, Lockheed Martin contends with competitor products

to the multinational Typhoon aircraft but it partners with BAE Systems on the Lightning F-

35.

Government-mandated target-framework model Antibiotics companies share a common problem with energy utilities such as EDF Energy in

that both sectors need their customers to buy fewer of their products. The UK energy

industry is obliged as a matter of government policy (the Energy Company Obligation [ECO])

to improve the heating efficiency of the UK housing stock. This requires large investments

that will result in customers using less of their product. Currently in a competitive market,

any money that EDF Energy spends on energy-efficiency measures must ultimately be

recovered from the customer. If EDF Energy raised its tariffs unilaterally to fund a non-

mandated energy-efficiency programme, it would lose customers to competitors. This

problem of collective action prevents energy efficiency unless all companies are required to

participate at specified levels. To catalyse sufficient incentives, it has therefore been

necessary for the government to mandate energy-efficiency measures across the industry,

although only for larger firms.

In antibiotics, many free-rider problems exist that may be beyond the capacity of any

company or country to solve. Similarly this may require a government framework and

funding that helps to align incentives throughout the supply and use chain.

See Section 6 for how these various lessons need to be translated and tested further to

address AMR.

In boxes 1–4 below are key points summarizing the models presented by the various

industries.

Box 1: The Allianz model: Catastrophe cover and reinsurance

Owing to the volatility of situations being covered, insurance companies load up the annual

premiums by about 30–50 per cent in expectation that insurance cover will be needed only every

few years but then will be sizeable. This loading-up is to ensure that the expected payout should

equate to about 70 per cent of the premiums paid over the years. For an event that occurs roughly

once every five years, there is 0 per cent payout of the premium for four years of the scheme and

then roughly 350 per cent of the premium paid out in the year when the event occurs. Insurance

companies typically manage these types of risk through diversified investment, as well as by

covering different types of catastrophe. They use reinsurance to cover extreme events – in essence

this pools the risk between companies – and to ensure geographic spread. For a microbial

18

epidemic/pandemic insurance cover, the risk is managed in two ways: by an aggressive R&D

programme to prevent the epidemic/pandemic in the first instance and by having the tools in hand

(antibiotics) to monitor and prevent infection and to treat patients if and when required.

Box 2: The Barclays model: An antibiotic corporate bond Barclays Bank shared a model borrowed from investment banking, in the form of an antibiotic corporate bond (ACB). A 10-year bond is purchased by private investors and is government-backed, thereby reducing the risk for investors. Funds from the ACB are injected into research companies that have fulfilled the criteria for early development of an appropriate antibiotic against a profile of an identified public health need. The company does not need to pay back the funds it receives. The bond principal is repaid from the sale of patent-extension certificates, a controversial idea that delays generic entry for another drug.

Source: Barclays Bank.

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Box 3: The Knowledge Unlatched model: A global consortium Knowledge Unlatched’s model shows the power of developing a global consortium (in its case with academic libraries) that would pay the upfront costs of the product (the e-book). The consortium invests enough money to pay the costs from manuscript to the first digital file. In return, the publisher places the digital file in open access upon publication. Discovery tools find the content and readers can read the monograph with no pay barriers. The publisher can generate additional income through the sale of print versions, tablet versions and other formats. In some cases, these paid versions may have enhanced features or functionality. The upfront payment by the consortium of libraries covers publishers’ investment costs, removing or reducing their financial risk. This model provides upfront funds, is self-sustaining for customers and producers and can be used for the delivery of many products. It also ensures open access as opposed to the older copyright-based model.

Source: Knowledge Unlatched.

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Box 4: The BAE Systems model The BAE Systems model addresses the transition from product development to service contracts with government. Every major aspect of its business model had to be reworked in view of the shift to services from products. Fifty per cent of its global revenue now comes from these service contracts, i.e. ‘contracting for availability’ and ‘contracting for capability’.

Source: BAE Systems.

4 Process-design Considerations

This section provides further details on the models presented in Section 3 based on

discussions at and since the Workshop about the lessons from these models and their

applicability.

A clear message from the different models is that the path to the solution, including its

simplicity and transparency, is as important as the solution itself. In view of that, this section

focuses on four process-design considerations: new partnership collaboration models;

drivers and facilitators for change; barriers and challenges to change; and timelines for

change.

Where relevant, each subsection discusses the models and then the implications for

antibiotics.

New partnership collaboration models

From the models it was clear that all stakeholders need to work together to address specific

challenges and bring about wholesale change in their industry. Companies and organizations

committed themselves to a specific infrastructural change (either organizational or industry-

wide) to support a potential future event. For antibiotics, key stakeholders include

November 14© BAE Systems (UK) 2014. BAE Systems]

The Changing Landscape

From a world of… … to a world including

Products

Outputs

Transactions

Suppliers

Elements

Solutions

Outcomes

Relationships

Network partners

Ecosystems

The shift to

services requires

business model

innovation

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governments and companies but also physicians, pharmacists, healthcare systems, health

payers, health technology assessors, patients and civil society.

For antibiotics, success is not measured solely by the approval of new antibiotics. We need

high-quality antibiotics, directed at the greatest threats to human health.21 In view of

antimicrobial resistance, we must consider incentives and accountabilities for maintaining

the approved antibiotic, for delivery and for any services contracted that may aid

deployment, stewardship and delivery when needed. These post-approval issues are

important and require special collaboration that aligns them with long-term incentives for

society. And this is not a one-time effort; a regular and adequate supply through the

research pipeline is needed.

The models highlight in what ways collaboration is needed and what factors can actually

help to achieve it. With the insights gained from the Workshop, we identify three challenges

in setting up, administering and sustaining appropriate collaborative partnerships for

antibiotics. The challenges are:

Managing global collaborations effectively

Moving from selling ‘products’ to ‘option-to-use’/’availability’ agreements with key

stakeholders

Building trust with stakeholders, governments, the public and customers

These issues are taken in turn, within the model options described below. They illustrate

how the different companies addressed these challenges and they show that there are

linkages across the three.

Managing global collaborations effectively

Given the nature of the AMR problem, global collaborations must be thought about at four

levels: 1) a global collaborative research effort led by a public–private partnership; 2) a

global antibiotics fund to spur research and conservation; 3) a global procurement

mechanism, akin to Gavi, the Vaccine Alliance; and 4) a global treaty or framework

agreement to support improvements in appropriate access and use in every country.22

1. Creating independent third-party collaboration, a global antibiotics PPP, between companies and research bodies focused on R&D There is significant support from major antibiotics stakeholders for much deeper

collaboration among life science companies, academic institutions, research funders,

universities and other stakeholders. This could take the form of a global PPP focused on the

research and early development of antibiotics: a PPP entity would be set up either as an

21

Outterson, K., Powers, J.H., Seoane-Vasquez, E., Rodriguez-Monguio, R., Kesselheim, A.S., ‘Approval and Withdrawal of New Antibiotics and Other Antiinfectives in the U.S., 1980-2009’, The Journal of Law, Medicine & Ethics, 2013, 41(3): 688–96. 22

Outterson, K., Powers, J.H., Daniel, G.W. and McClellan, M., ‘Repairing the broken market for antibiotic innovation’, Health Affairs, 2015, 34(2): 277–285.

22

independent joint venture or as a strong collaborative network concentrating on common

objectives, strategic direction and priorities. We refer to a PPP for collaboration on pooling

resources as the Global Antibiotics Private–Public Partnership (GAPPP).

The Workshop discussions suggested a number of ways in which the GAPPP could be

created. One of the strong messages was that a collaboration/consortium/joint venture is

needed to bring about wholesale change. As well as for change of infrastructure, investment

is needed to increase R&D funding. This is essential for attaining a ‘critical mass’ in discovery

and development that will deliver results in early-stage work sufficient to overcome the high

attrition rate that each organization currently faces on its own and to minimize the risk

exposure of individual companies.

As with the Knowledge Unlatched model, this would bring together all the providers to

jointly deliver against set needs/profiles that customers (governments and healthcare

systems) identify as priorities. This powerful independent collaboration of private, academic

and public-body partners would combine all the necessary skills, expertise and resources

with a clear, coordinated focus on who within the collaboration is delivering against which

profile. The defence industry ‘s experience further supports this.

The key research groups and companies involved are relatively few. Robust global

coordination is essential, and the proposal discussed above could be built from the current

New Drugs 4 Bad Bugs (ND4BB) collaborations under the IMI.

Working groups in the EU, the US, the WHO and elsewhere should not limit their vision to a

national or regional approach but should explore a global PPP for antibiotics R&D (as now

being discussed by the WHO). The exact nature of this needs to be explored further with an

understanding of the how this organizational model would drive the changes needed and

achieve the desired impact.

2. Creating a global antibiotics fund to manage the funding programmes Besides the GAPPP collaboration, the Workshop stimulated thinking on the possibility of

establishing a global antibiotics fund (GAF). Many stakeholders support the generation of a

GAF, administered by an independent third party and accessible to many companies,

academic institutions and public bodies, in order to fund the appropriate research, early

development and good stewardship of antibiotics.

Alongside the major national funds such as the IMI, BARDA and key targeted research

council funds, a GAF would be set up as an overarching fund to bring together all the small

existing funds in the sector. It would also generate the additional finances needed.

It is envisioned that much of the financing from a GAF would support research efforts up to

early phase I, but a GAF could also offer grants for early-stage development, underpinned by

the concept of ‘no strings attached to failure’. This would mitigate risk for venture capitalists

and companies, especially for small biotechs, as they face more uncertainty than large

23

companies. It would mean that if companies fail to produce a new antibiotic, they do not

have to give the money back. BARDA is a model for this, and could be built on. Its funding is

100 per cent non-dilutive, with almost no strings attached, and there is no repayment,

whether there is failure or success. Some of the existing funds have some strings attached,

which should be evaluated in due course.

It is important that such a fund should be financed sustainably. This could include one or

more of the various funding mechanisms proposed in previous sections of this report, as

well as existing funding sources. Funding could relate to both pre-launch and post-launch

incentives for new antibiotics. The challenges to address are:

Ensuring that a GAF generates sufficient external funds to help drive a transformational

change to the delivery of innovative antibiotics

Whether or not a GAF should hold and license antibiotics patents, akin to the Medicines

Patent Pool23

Setting up an appropriate model for governance of a GAF, including transparency and

accountability

Further work by the IMI DRIVE-AB consortium, the US CARB, the WHO and the UK’s Review

on AMR could test how a GAF could be established and operated.

The models put forward at the Workshop highlighted that various funding and procurement

models could also work in collaboration. For antibiotics, it is important to explore how

independent funding from bodies such as the Wellcome Trust, the IMI and BARDA could

coexist with funding and administration from a GAPPP and a GAF. All these groups could

collaborate around a common framework besides participating in pooled funding.

Additionally, it is proposed that consideration should be given to setting up an EU BARDA-

type fund.

3. An independent third party becoming the procurer and distributor of antibiotics As mentioned above, a further evolution of this model could be that the global, central

funding body (such as a GAF) also becomes the global procurer and provider of the

antibiotics. This would be analogous to the model used by Gavi, the Vaccine Alliance. Gavi is

an international organization bringing together public and private sectors with the shared

goal of creating equal access to new and underused vaccines for children living in the

world’s poorest countries. It not only pays for vaccines but also stimulates their

development and expanded production. By pooling the demand from developing countries

for new vaccines and providing long-term, predictable financing to meet this demand, Gavi’s

business model influences the market for vaccines. It has secured, among other things, long-

term commitments from donors for national immunization programmes and an innovative

23

The Medicines Patent Pool, established by UNITAID, seeks to improve access to HIV treatments by licensing patents from originator companies and making them available non-exclusively to generic companies for sale in developing countries. This is designed to reduce prices in developing countries and also to enable the development of new fixed-dose combinations.

24

advance market commitment pilot programme for pneumococcal vaccines. The AMC is a

form of delinked reward whereby the companies supplying the vaccine are rewarded

separately for their investment in R&D in return for supplying products at close to their

production cost. There has evolved both a predictable finance stream (both pre-launch and

post-launch) and a commitment from companies to supply the vaccines at a predefined

price. Some challenges will need to be overcome in order to apply this model to antibiotics:

AMCs have been criticized as inefficient,24 and antibiotics, unlike vaccines, can have harmful

effects for others when used inappropriately.

The Knowledge Unlatched model stimulated thinking about ways in which an independent

third party could act as a broker to connect public health payers with industries in an

efficient way, e.g. to prioritize funding, delivery and focus against public health needs. It also

instigated thinking about how the industry can work together to agree on cost ranges for a

particular product (based on agreed criteria). That would enable simpler consistent pricing

arrangements so as to help cover costs.

Further work is needed in order to understand how a third-party independent broker could

have the desired impact and to determine how it ought to be set up, run and governed.

Another question that must be explored is whether or not a GAF should also be the global

procurer and provider of antibiotics to customers.

4. A global treaty or framework to support appropriate access and use Even successful research efforts will ultimately be futile unless global society takes better

care of new antibiotics brought to the market. We need to ensure appropriate access to

these lifesaving drugs while dramatically reducing inappropriate use. National efforts can

delay resistance but resistant pathogens know no borders, and failure in one country

threatens the health of everyone. Thus we need a global treaty or framework agreement

that will articulate measurable goals for disease surveillance and antibiotics stewardship in

every country. Some countries may require financial support in order to improve national

laboratory capacity and to strengthen access, stewardship and appropriate use.

In the energy sector, EDF Energy was unable to convince its customers to buy less energy

without direct financial incentives, and no one energy company can take that step without a

clear agreement from government to share conservation costs fairly among the companies.

For antibiotics, we face a similar problem of collective action. A global agreement can

support national efforts to conserve antibiotics, with countries appropriately sharing the

risks and benefits.

24

Light, Donald W., Advanced Market Commitments: Current Realities and Alternate Approaches, Health Action International, 2009. Available at http://www.haiweb.org/31032009/27%20Mar%202009%20AMC%20Current%20Realities%20&%20Alternate%20Approaches%20FINAL.pdf.

25

Moving from selling products to ‘option-to-use’/‘availability’ agreements Moving towards ‘availability’ contracts requires agreement between relevant parties in

advance about what should be included and the nature of any collaboration. In the defence

industry, companies simultaneously collaborate with their competitors and compete with

their collaborators. Many of the contracts have a prime contractor, but it then subcontracts

with most of the industry. There is a long-standing understanding about this in defence, as

individual companies are not able to develop the type of products required and to deliver

value-adding services on their own. Thus although contracts are to be competed for, laws,

waivers and systems allow for the collaboration needed in order to serve the government’s

defence needs and to ensure that any competition does not hinder its ability to act rapidly if

necessary.

In the field of antibiotics, the need for collaboration is great, rooted in the biology of

resistance. Resistance can be expressed across different pathogens and drugs both within

and across classes. As a result, much of the collaborative effort to preserve antibiotics’

effectiveness would be needed after regulatory approval. This would be a change from

current practice.

Collaboration among antibiotics companies is already happening, e.g. in the IMI’s ND4BB

programme. However, these collaborations tend to be at the pre-competition stage. They

may need to be expanded to the development and post-approval of antibiotics. For the

types of collaboration being proposed, and especially when related to joint clinical and/or

post-launch programmes, there may be a need for specific governmental guidance in order

to ensure that anti-competition laws do not hinder the activities of PPPs.

As with the ‘availability’ contract and the proposals for collaboration discussed above, there

is a need to test and explore the ways for companies to collaborate more effectively in the

clinical phases of R&D and in the delivery of antibiotics after approval. As a further lesson

from the defence sector, groups such as DRIVE-AB and the UK’s Review on AMR would be

well placed to explore all the conditions required to make collaboration successful.

Building trust Without trust among key stakeholders, no change will take place. The EDF Energy

experience underlines that customer trust, as well as trust between companies and

government, is essential. In the energy sector, the government’s role is to oversee the

competition process and to ensure that incentives and policies are aligned in order to

achieve efficiency targets. EDF Energy undertook background research to understand the

government’s priorities so as to work collaboratively. As part of this trust-building exercise,

and given the competitive nature of the energy sector, it was important for companies that

the framework set up by government allowed them a degree of flexibility and

independence. Similar trust-building steps may be needed for all stakeholders in antibiotics.

26

In the defence sector, the commitment between the company and the customer is made

many years before the service is expected to be needed. For this reason, there must be real

clarity about what will need to be delivered. Trust is built by transparency about each

partners’ needs and also by being held accountable (and regularly checked against this) to

deliver against the details of a contract. There are clear mechanisms for changing orders

over the extended period of the contract and clear dispute-resolution processes are in

place.

BAE Systems seeks to engender trust through key performance indicators. Once the product

is available, the defence contractor is held accountable to very clear KPIs. They include the

turnaround time for provision of the product and the degree of availability. A simple

example of a KPI would be the number of aircraft in a fleet that is ready for service at any

one time. KPIs can be tailored for many different forms of availability.

Dun & Bradstreet works to improve trust through greater transparency and by offering

options. It changed from a ‘price-per-report’ model to an annual payment model for its

intelligence in order to add value for its customers, thereby delinking from the unit–volume

model.

An additional option in the pricing model that D&B offered was a fee based on a per cent

(e.g. 10, 5 or 1 per cent) of customers’ savings made thanks to information provided by it.

Most of the time that would be significantly more than the cost of the Dun & Bradstreet

contract. No one took that option, but it meant that customers were far more willing to pay

the price that was being quoted for the annual service fee. Customers are still offered the

choice to pay for individual reports; but with prices increasing regularly, they are

incentivized to move to the new model.

Drivers and facilitators for change

Each of the business models had one of three strong drivers for change relevant for

antibiotics: market drivers, societal drivers and financial drivers.

Market drivers Market forces required change. This was the result of different causes, such as a burning

platform or customer or government needs (sometimes government is the customer). In the

defence sector, for instance, the government as the client wanted to ensure that companies

could provide the required service arrangements and better manage their own expenditure.

The Knowledge Unlatched initiative came about because of a desire to change the market,

to use the internet and to extend to books and monographs the concept of open access

successfully pioneered in the market for some academic journals by the Public Library of

27

Science (PLOS). Dun & Bradstreet realized that clients were requesting a change in its

service for greater focus on reduction of risks (such as credit risks), and it had to take into

account new competition from internet-based data providers.

In antibiotics, if the market environment does not change, life sciences companies with a

broad portfolio will continue to switch their investment and work to other disease areas.

And SMEs focusing only on antibiotics could face extinction.

Societal drivers In some sectors, such as the energy industry, there was a ‘societal need’ for change. The

prospect of climate change was the driver for enhanced energy efficiency, but it requires

collective action, at the global level, followed up by governments implementing different

relevant policies to achieve their national targets within a global framework. This global

‘societal need’ is evident also in relation to resistance to antibiotics, and any actions may

need to follow a similar pattern in which international challenges/agreements are then

addressed by national or regional initiatives.

Financial drivers Financial drivers of change were very important. There was a need for a steady revenue

stream, but the existing business model was becoming unviable as a result of external

factors. This was particularly the case for Dun & Bradstreet and Knowledge Unlatched.

Clearly, this is a critical driver for antibiotics too.

The Workshop also drew attention to important factors in catalysing change. These

included:

The importance of effective ‘champions’. Creating Knowledge Unlatched required a

‘champion’ who could see and push forward an alternative vision and envisage how it

could be made operational. The new proposal needed to encompass practical

considerations, such as reducing waste in the supply chain, reducing the risk to

publishers, covering origination costs, achieving open access and making the purchasing

process easier. We already have some ‘AMR champions’, mostly at the national level

(e.g. Dame Sally Davies, currently Chief Medical Officer in England), but they need to be

heard and to be able to take action at the international level in order to drive forward

the necessary changes.

The importance of generating a steady revenue stream, with increased transparency.

BAE Systems’ experience shows how providing a service rather than just a ‘product’ can

generate steadier revenue streams. Moving towards that model increased the

understanding and transparency of the variability and complexity of all in-service

support costs, enabling all parties to benefit. ‘Risk-sharing’ (‘gain-share’ and ‘pain-share’

mechanisms) can be seen as a facilitator, by reducing uncertainty about future

expenditure and revenues, should actual costs markedly exceed expected costs. In the

antibiotics scenario, sustainable and predictable costs for healthcare systems and

revenues for companies are essential.

28

The importance of governments partnering and providing clear direction. Government

involvement is relevant for only some of the models, but the EDF Energy example shows

the importance of governments providing strong direction and a regulatory framework.

It is also important this is done in partnership with the relevant companies and civil

society and with sufficient flexibility in the way targets can be achieved. This keeps

competitive pressures on companies, ensuring that targets are met at the least possible

cost. It is clearly important that leading governments involved with antibiotics R&D

should provide both this direction and the framework within which companies and other

actors can move towards common goals.

Meeting client expectations. The Dun & Bradstreet example shows that as technologies

change, consumers expect that the service provided to them will adapt accordingly in

order to meet their needs. In these circumstances, competition is a powerful force to

deliver the changes consumers want. Companies need to change rapidly and adapt or

competition will drive them out of business. In a fast-moving environment, people are

more open to considering new business-model ideas, including the risks associated with

them.

What is missing in the drivers for change in the antibiotics market We need to understand the drivers of the antibiotics market more clearly. We also need to engage the correct individuals globally in order to test the future-option proposals and to ensure a clear understanding of the type and magnitude of market changes needed to achieve the desired result. Unlike in most examples, there are many ‘customers’ for antibiotics (and medicines in

general): patient, payer, pharmacist, hospital and doctor, all of whom may need different

incentives to manage antibiotics appropriately. Because there is no single driver of change,

bringing it about is particularly complex. There are currently no incentives that target each

of the various customer groups. Incentives, both financial and non-financial, may help in

finding new ways to preserve the effectiveness of existing antibiotics and any new ones

developed. The solutions should address the related issues of overuse of existing drugs and

access to antibiotics in lower-income settings. In essence, such incentives relate to social

and behavioural interventions.

The ultimate customer, i.e. the patient, does not have an effective voice in bringing about

the change needed. To the extent that the consumer has any voice, it will not generally be

informed by the need to limit resistance. Patients must be educated about when an

antibiotic should or should not be used and be involved in bringing about the changes

needed to manage the use of antibiotics appropriately.

This recognition highlights that there is a further need to address how patients and their

civil society groups can gain a voice in the major global discussions to design policy

responses to the crisis of AMR (such as DRIVE-AB, the WHO Global Action Plan, the UK’s

Review on AMR and the US CARB). In addition, incentives for all ‘customers’ should be

aligned to ensure a rational use of antibiotics in every setting around the globe.

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Barriers to change There are always barriers to change in any industry, ecosystem or organization. The

participants from the other industries discussed some of the barriers they faced and how

they got past those challenges.

Insufficient trust Establishing trust is very important in effecting change. In the energy sector, customers

often do not trust companies. This means that any action driven by companies that requires

customer engagement can be difficult to implement. To overcome this barrier, companies

need to come up with imaginative ideas about how to build and sustain trust based on a

realistic understanding of customer motivations. The experience of EDF Energy was that

customers accepted investments in energy efficiency when they were not required to make

a contribution under the Energy Company Obligation. But it was less successful in the Green

Deal scheme in which consumers, although recipients of a significant subsidy, are required

to make a contribution.

For antibiotics, patients have not responded strongly enough to warnings about creating

resistance in, for example, clostridium difficile and methicillin-resistant staphylococcus

aureus. Increased cooperation and coordination between the industry, government and

media could help in raising customer awareness of resistance by focusing future stories on a

possible lack of hygiene at hospitals and also on the difficulty in treating the infection as a

result of resistance.

Mutual trust and understanding of the needs of both healthcare systems and private

companies in antibiotics has been growing in recent years. Otherwise, all the engagement

seen recently would not have been possible. There is a need, however, to bring down any

further barriers that would block future developments.

Infrastructural/organizational change

Adopting new business models usually involves changing internal structures and incentives –

not always an easy process. For example, Dun & Bradstreet required strong leadership

throughout the organization in order to make the transition to revenue streams delinked

from physical-product sales.

One of the crucial challenges for Dun & Bradstreet was that radical changes in its sales

model necessitated wholesale revision in the training and compensation of its sales force.

Different skills were needed, as was a willingness of the team to learn and adapt quickly.

Where this did not happen, Dun & Bradstreet had to change the sales team and its leaders.

Similarly, ‘delinkage’ in antibiotics will require strong leadership and fundamental changes

in sales forces’ behaviour.

As it has not been tested before on this scale, departure from the traditional ‘price–volume’

model is not straightforward, and there is a need to ensure that several options are

available for companies. Larger pharmaceutical companies might have more resources to

adapt to big changes; but SMEs, with more limited resources, can face greater uncertainties.

These need to be taken into account.

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Hospitals, pharmacies and providers will not be motivated to change their antibiotics

business model without leadership. As change costs time and money, there may be a need

for upfront incentives to embrace and embed a change of business model along the

antibiotics supply chain, including hospitals, clinics, healthcare providers and patients. This

issue is acute both in wealthy countries and in low- and middle-income countries.

Additional research is needed to investigate which drivers will ensure that change happens.

For good stewardship, a coordinated approach is required between numerous actors

supported by government; and appropriate incentives, both financial and non-financial, are

required for the entire supply chain. The UK’s Review on AMR, the DRIVE-AB group, the US

CARB and the WHO are well placed to explore these issues and how they can contribute

best to good stewardship.

Timelines for change

The industries that went through significant business model changes emphasized that

change does not happen overnight; it can take a long time. But for antibiotics, time is of the

essence. There is strong evidence that the important changes required must begin

immediately; otherwise it will be too late. The global political momentum supporting these

changes has never been greater. Thus there is an urgent need to make use of it.

The Knowledge Unlatched model is a small-scale change in comparison to the challenge

posed by antibiotics, and yet it took 18 months to convince stakeholders before a pilot

scheme could be designed and run. The time from inception to execution was about four

years. But once the pilot scheme began, there was significant momentum.

For BAE Systems, there has been a progressive evolution over the past 10 to 15 years, with

several stages and with enhancements to the business model made over that time.

For Dun & Bradstreet, the initial transformation began about seven years ago. It took about

three to four years to embed it in the business. Owing to the major change that was

required, a staged approach was taken. Retraining staff took approximately 6 to 12 months.

Implementation took another 12 months, and further adaptation and enhancements were

needed in the years after that.

As an illustration of the lags in implementing changes in the AMR field, ‘delinkage’ models

for antibiotics were first discussed seriously in 2009 at a conference organized by the

Swedish government, which then held the EU presidency. Since that time, very little has

been done to improve the commercial environment. The only notable exception is the GAIN

Act in the US, which many observers consider will have only a limited impact.25

25

Outterson, K., Powers, J.H., Daniels, G.W. and McClellan, M.B., ‘Repairing the broken market for antibiotic innovation’, Health Affairs, 2015, 35(2): 277–285.

31

Because we need a new business model to be embedded in the healthcare industry in 5 to

10 years’ time, we must move fast to determine the business model options that we want to

test. Even setting up and executing small pilot schemes take time.

Initiatives to re-engineer antibiotics business models should also assess the time taken to

deliver and implement any new ideas proposed. Some initiatives can begin immediately,

such as increased funding for basic research, monitoring and infection control. But in view

of the time lags expected while the macro changes are put in place and start to have effect,

interim solutions will be needed.

5 How Could This All Work as a System? The problems of increasing resistance and a thin R&D effort are complex, and a menu of

incentives and funding mechanisms will be required throughout the life cycle of an

antibiotic. In this section, we draw on the analysis presented in previous sections of this

report and provide examples of how some of these mechanisms could be linked together to

create a holistic system.

As stated earlier on, it may be appropriate that different funding mechanisms and different

collaborative partnerships/infrastructures are put in place for the R&D stage and for the

post-approval and marketing stages.

Below are three illustrations of how several mechanisms could be combined together.

Illustration 1: A combined approach that includes both pre-approval and post-approval incentives There are three aspects to this approach:

a) Creation of a global antibiotics public–private partnership (GAPPP)

Pharmaceutical companies have sometimes come together to create an independent entity,

for example the HIV company ViiV, as a joint venture between three companies. The

proposal here is that besides companies coming together, public bodies should join with

companies to create a new PPP to focus on collaborative research on antibiotics and their

clinical development.

A global antibiotics private–public partnership/consortium of private companies, academic

institutions and public bodies should be established. A GAPPP should be sustainable,

independent and self-funding from operations. Preferably it would be independent,

although it could be made to work as a virtual PPP. It would be a collaboration of resources

and science focused on the research and early development of antibiotics in line with

32

predefined public health-need profiles. This partnership is more likely to reach a ‘critical

mass’ of compounds in early R&D than are companies and institutions working alone.

b) Creation of a global antibiotics fund coordinating with key national targeted funds

Alongside the major national funds such as the IMI, BARDA and key targeted research

council funds, a global antibiotics fund would be set up to bring together all the small

existing funds in this area as well as to generate additional finances in order to deliver the

greater funding needed. A GAF would provide monetary support to a GAPPP so as to enable

the R&D needed in response to identified public health needs globally. It would work with

existing funds for awareness of the work each is supporting and would collaborate with

them in agreeing the priorities and direction for funding and determining courses of action.

In this illustration, access to grant-funding could be gained by making a precommitment to

accept that after approval of the new antibiotic, the organization would have to agree to a

‘delinkage’ regime. It could not commercialize the antibiotic in the standard ‘price–volume’

model; the antibiotic would be used and targeted only where and when needed.

c) Funding and administration

A GAF should aim to be self-sustaining, and therefore funding needs to be available in

advance of antibiotics’ development and approval. Besides the funding coming from the

amalgamation of the small currently existing funds for antibiotics research, one option is a

‘premium’ payment by governments at a set percentage of national expenditure on

antibiotics. A level of 10–20 per cent in wealthy countries could be sufficient. Other options

include a user fee on non-human uses of antibiotics.26 Barclays also proposed financing and

replenishing funding with models such as the ACB–PEC mechanism. Other funding

mechanisms should also be explored.

As part of the ACB–PEC model put forward by Barclays, it is proposed that an agency

(possibly a GAF itself) should be created that administers the whole ACB generation, the

investment of funds, the sale of the PECs that are awarded and the subsequent distribution

of funds from the sales. Some of these funds would be given back to the organization that

developed and licensed the new antibiotic.

Rather than as a one-off payment by this agency to the organization that developed the

antibiotic (potentially a GAPPP), this payment could be set up as a ‘service-availability’

contract and be spread over 5–10 years and linked to KPIs agreed on by the main customers

for the antibiotic. It is important to ensure that it is attractive for the organizations not only

to develop the new antibiotic but also to be incentivized to support delivery, good

stewardship and appropriate use when needed. The payment method to the developing

organization should adequately compensate for any services that the organization would be

asked to deliver and should be large enough to ensure that it incentivizes organizations to

develop the antibiotics and to set up these ‘service-availability’ agreements. The annual

26

Hollis, A. and Ahmed, Z., ‘Preserving antibiotics, rationally’, The New England Journal of Medicine, 2013, 369(26): 2474–76.

33

payments could be determined so as to include an appropriate return on investment for

organizations. The KPIs to trigger payments could include:

Keeping the antibiotic registered globally

Keeping manufacturing capabilities and capacity current and at an appropriate level of preparedness

Ensuring, setting up and maintaining the ability to distribute and deliver the antibiotic

when needed

Providing the professional education required to ensure appropriate use of the

antibiotic

Potentially providing a continuous monitoring programme

But trying to create one mechanism that covers all phases of the research, development and

marketing of an antibiotic could overcomplicate matters.

Illustration 2: Separate pre-approval and post-approval-funding schemes

As with Illustration 1, consideration should be given to a GAPPP of private companies,

academic institutions and public bodies established to pool resources and science in order

to address R&D for antibiotics. Separate funding mechanisms can be put in place to create

the finances needed to a) fund innovation and research to enable getting a compound to

phase 1 of development, b) pay for development and then c) fund all the services needed to

keep the antibiotic available for use, i.e. to maintain, manufacture, distribute and deliver it

as needed.

Lessons from BAE Systems’ ‘service-availability’ contracting model and Allianz’ catastrophe

insurance model indicate how this could be applied to the antibiotics sector.

In the pre-approval stage, funding could be provided by the national and regional funds that

already exist, in parallel with a newly formed GAF.

This illustration suggests two options. The first option assumes that large pharma could do

the development from the phase 2 clinical trial to approval and assume the risk and funding.

The assumption would be that any post-approval agreed payments would compensate for

these costs and bring an appropriate return on investment. The second option is that SMEs

could take on the development from phase 2 and find ways to secure investment and

funding.

34

Figure 1: Holistic application of all proposals in to one system

a) ‘Service-availability’ agreements/insurance-type policies

Large organizations. In the event that a large organization has developed a new antibiotic

and it is approved, a separate funding mechanism would come into operation. This post-

approval system would consist of ‘service-availability’/‘option-for-use’ agreements between

the developer/deliverer of the antibiotic and the governments and healthcare systems in

need of it (or an independent body acting on their behalf). During development, the

organization would look to secure contracts with its customers, i.e. to gain agreement that

governments would pay an annual fee (for the commitment to provide the product and the

services to deliver it) delinked from the volume of sales.

‘Service availability’ would cover the supply chain (manufacturing capacity and delivery of

product), maintenance of regulatory approvals, post-approval pharmacovigilance, adverse-

event reporting, education of healthcare professionals on how to use the antibiotic and

similar requirements. It would also focus on issues specific to antibiotics, for example

delaying resistance and building better surveillance datasets to guide policy and the health

impact of the programme.27 The annual premium paid to the developer would ensure

covering the costs of developing the antibiotic and providing the post-approval availability

service and would factor in an appropriate profit. This profit margin is needed to ensure that

developers are enticed back to developing antibiotics and that they stay in the field.

Small and medium-sized enterprises. If SMEs were to take on the development of a new

antibiotic from phase 2 onwards, they would probably need to look for further investment

27

Outterson, K., Pogge, T. and Hollis, A., ‘Combating Antibiotic Resistance Through The Health Impact Fund’, in The Globalization of Health Care: Legal and Ethical Issues, Glenn I. Cohen, ed., Oxford University Press, 2013, Ch. 18.

Other Grants &

funds

GAF (Research & innovation )

Ou

tpu

t

GAPPPOthers

Research Development post phase 1

Org

aniz

atio

nFu

nd

ing

Priority funding

Compounds

Managed market

Pharma

Buy compounds

Funds from rights sales

Rev

enu

e

GAF as global procurer

(purchasing fund)

Funds from rights sales

User taxes

Sales of PECs

Availability contracts

SMEs

35

and funding in order to reduce their risk. It is expected that like large organizations, SMEs

would early on in development come to an agreement with their customers on ‘service

availability’. Agreement on ‘service-availability’ contracts should then enable the SMEs to

secure further finance from investors in relation to expected returns from customers once

the antibiotic is approved. Additionally they may look to the GAF and other national and

regional funds to help with funding through to development and not just through the

research phase.

b) Insurance-type schemes supporting a focus on pandemics and regional resistance

For agreements made with governments about services needed in the event of a pandemic,

additional steps could be taken. Owing to the unpredictable nature of a pandemic, the

annual ‘service-availability’ premium charged to governments would need to be higher. This

would ensure that sufficient funds are built up in years with no pandemic in order to cover

the cost of supplying services when a pandemic does arise.

The contracted organization needs to work out the costs to it of responding rapidly to a

pandemic, for example for quickly manufacturing the antibiotic and delivering it to the

affected regions. As with insurance premium calculations, the total estimated cost is then

divided by the number of years expected between events, i.e. from when the contract is

signed to when modelling shows that a pandemic may arise.

Insurance companies’ catastrophe policies show that calculated premiums would need to be

frontloaded and raised by 30–50 per cent so that companies can amass the funds needed to

cover all the costs of responding when a pandemic occurs and of the risk element relating to

its unpredictable size and timing. But owing to the regulatory process, developing a new

antibiotic from scratch will take time. Additional changes to streamline regulations might be

needed, as in the recent case of Ebola; and that was possible only because governments had

invested in basic Ebola research for more than a decade.

It is expected that several governments would establish these policies with the various

companies/organizations or the GAPPP that has developed the antibiotic and that, as a

result, the full costs would be covered and the companies would make a profit (i.e. they

would have an incentive to make and deliver the antibiotic). Alternatively the companies

could license the drug to the global agency and turn the production and delivery functions

over to a global agency, as discussed below in Illustration 3.

Additional information from the defence industry is needed about how these models work

in practice, and the government’s perspective is necessary too. The UK’s Review on AMR

would be well placed to investigate this further with the aim of making proposals to

governments. The IMI DRIVE-AB groups could model and test the impact of these potential

changes.

36

Illustration 3: Buy-out option of approved antibiotics to a delivery company A further evolution would be to consider whether or not the registered antibiotic should then be licensed for the full term to a global agency akin to the Medicines Patent Pool. This delivery entity (possibly a GAF) would eventually own several new antibiotics and would be the body that works with governments/healthcare systems to generate and deliver against the appropriate ‘service-availability’ contracts. It would be responsible for service tasks such as maintaining registration and ensuring production and distribution. The pros and cons of these various illustrated options need to be tested. It is suggested that the IMI DRIVE-AB consortium work plan and the US CARB programme could most appropriately explore them.

6 Areas to Explore Further and Recommendations for Further

Programmes In the antibiotics sector, governments and health services are the customers. They can determine the profile of the antibiotic, the diagnostic and the vaccine required to address the public need. The case studies of models from other industries presented at the Workshop raised a number of areas in which further modelling, research and testing are needed in order to determine whether or not these models could be applied to the antibiotics sector, could work robustly and could achieve the aims we are looking for. a) Funding-model considerations Several further matters, set out below, must be addressed as these various funding models are explored further.

How can the various funding-model proposals generate sufficient external funds to

drive a transformational change in the delivery of innovative antibiotics.

What volume of additional funding is needed? What is the process for determining

this global budget?

‘Service-availability’ agreements/insurance-type premiums

If ‘service-availability’ agreements with annual insurance-type premium payments

were put in place, what level of payment could governments afford and what level of

funding could be raised from this ‘annual premium’ paid by governments?

National and regional funds plus creating a global antibiotics fund

How can existing regional and national funds be better coordinated?

How could a GAF be established and administered by an independent third party,

and be accessible to companies, academic institutions and public bodies, in order to

fund the appropriate R&D and good stewardship of antibiotics?

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o What would be needed to get governments to endorse and support such an

approach?

o How would an independent agency (possibly a GAF) arrange with all the

governments and health services involved what the requirements are for

given products?

o How would that agency work with the various companies to ensure that the

requirements for a product are provided and that companies receive an

appropriate reward for delivering the product?

o How would various funding and procurement models exist in parallel? How

could funding from bodies such as the Wellcome Trust, IMI or BARDA coexist

with funding and administration from a GAF?

Should a GAF also be the global procurer and provider of a product to customers?

Creation of a government-backed antibiotic corporate bond

How should be evaluated the efficiency, fairness and unintended consequences of schemes such as the antibiotic corporate bond for various repayment mechanisms (including PECs)?

What are the modifications needed in the ACB–PEC scheme to make it work for all stakeholders?

How should be tested the economics of an ACB and whether or not it can function with or without a PEC?

User fees for non-human uses

How would the feasibility of a user fee for non-human uses of antibiotics be established?

b) Environmental/process considerations Public–private partnerships

How could a global antibiotics PPP focused on the research and early development

of antibiotics be established? How could different industry, academic and public-

body players be involved so as to generate a ‘critical mass’ in discovery and

development and fill the supply pipeline while minimizing the risk exposure of

individual companies?

What is the best way to identify the potential collaborations needed to make these

various business models a success and for them to be effective and efficient?

How should be expanded collaboration between companies and research

organizations after approval of antibiotics as well as for R&D?

Working with governments to promote access, conservation and innovation

Global efforts on access, conservation and innovation may require a global treaty or

framework agreement.

Political momentum is necessary; and as key AMR stakeholders are already talking to

each other, this momentum should be appropriately used. Along with it, there needs

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to be clarity about the measures and targets that are communicated publicly and

about who is accountable for delivering these measures.

In energy, customer trust is essential. But trust is also crucial between companies

and government. EDF Energy did background research to help shape the government

effort. It is important that governments set a framework for what the industry needs

to deliver in addressing the AMR challenge, but a framework must also be created

that allows companies and organizations to provide input in the design phase and

also affords some independence for implementation within the framework.

Competition law

It is necessary to explore what is needed (waivers, new guidance from governments

etc.) to ensure that competition policy does not hinder the necessary collaborative

actions required in the antibiotics sector.

Incentivizing all the appropriate points in the entire supply chain

If companies are expected to lead on conservation measures with their customers,

there must be a clear understanding of what incentives are needed for hospitals,

GPs, dentists, pharmacists and patients in order to embed and sustain the changes

needed.

These changes must be global but must also be painstakingly adapted to the unique

conditions in each country.

7 Summary and Conclusions

Learning from other industries has been a very fruitful exercise. They have offered a

different perspective on how to tackle the AMR issue, and provide relevant analogies to

consider. This report has highlighted a number of key lessons about how these industries

have adapted to diverse challenges in their external environment. For them, it was a matter

of adaptation and flexibility to ensure success. And the report has shown that although

change is difficult and requires substantial effort, cost and time, it is more than possible

when all the necessary stakeholders are aligned.

Based on these lessons and on our own review over the past few months, we now articulate

three essential messages:

1. There is a need for global collaboration on a scale not seen before in relation to AMR.

Many independent initiatives are under way nationally and regionally, but these need

to be brought together to engage on a global scale. This report is designed to help

bridge these various efforts and move towards consensus for global action. The

proposals for a GAPPP and a GAF are a possible way forward for pooling skills, resources

and funding in order to ensure a long-term, sustainable solution. A global treaty or

39

framework agreement might be needed to ensure access to antibiotics and their

appropriate use, including surveillance.

2. There is a need to start thinking about ‘service-availability’/’option-to-use’

agreements/contracts between developers/manufacturers and healthcare systems as a

means to support the ‘delinkage’ concept. As in defence, products are developed but

kept on the shelf, maintained and ready when needed, including all the services to

deliver them effectively and efficiently. Long-term contracts with customers ensure that

the services they require are available when needed. Innovators of new antibiotics

should not be rewarded with the traditional ‘price x volume’ model; they should focus

more on delivering the product, resources and services when needed. In the life sciences

sector, there is already a move beyond the traditional ‘price-per-pill’ model. But the idea

of a ‘service-availability’/’option-to-use’ model goes beyond that. Governments would

pay an annual ‘service-availability’ fee/premium delinked from the volume of sales.

Enough resources need to be available to guarantee that new antibiotics can reach a

patient in any place as soon as they are needed, but only when needed. Lessons from

the insurance industry indicated how these annual ‘premiums’ could be calculated.

3. Customers (in the broadest sense) must be engaged in order to ensure that the right

incentives, both financial and non-financial, are aligned from bench to bedside. We

should not focus on incentives just for companies but must include prescribers, health

systems, patients and all other stakeholders.

We very much hope that the ongoing initiatives and programmes in the antibiotics field will

actively consider our ideas and recommendations. It is important that the most is made of

the current political momentum across the globe to tackle resistance to antibiotics. This is

the time to move, and we need to move quickly.

Appendices available at:

www.biginnovationcentre.com/publications

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Acknowledgments

Research and authoring contribution

Additional research support

Supported and sponsored by

Contributing companies

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About the Authors

Ella Jaczynska Ella Jaczynska is Vice President in GlaxoSmithKline’s (GSK) Corporate Strategy Group. She is

seconded, as an innovation leader, to the Big Innovation Centre and leads the Health Plus Action

Group, devising and driving projects in the health sector that cannot be resolved by the health

industry on its own. She is a physiologist and pharmacologist by training with 23 years’ experience in

pharmaceutical R&D. Most recently, she directed the Infectious Diseases Global Regulatory Group in

GSK. She was responsible for leading the regulatory support in GSK’s discovery and development

portfolio for antibacterials, antivirals, HIV and diseases of the developing world. She was an active

member of the Association of the British Pharmaceutical Industry and the pharma antibacterials

working parties that collaborated with the European Medicines Agency, the Medicines and

Healthcare Products Regulatory Agency and the US Food and Drug Agency to bring necessary

changes and updates to the regulations for the development and licensing of antibacterials.

Kevin Outterson Kevin Outterson is Professor of Law and N. Neal Pike Scholar in Health and Disability Law at Boston

University. He is an associate fellow at Chatham House and a founding member of the Antimicrobial

Resistance Working Group at the Centers for Disease Control and Prevention in the US. For the past

decade, his academic research has focused on the legal ecology of antimicrobial resistance. At

Boston University, Professor Outterson co-directs the Health Law Program and is Editor-in-Chief of

the Journal of Law, Medicine and Ethics.

Jorge Mestre-Ferrandiz Jorge Mestre-Ferrandiz is Director of Consulting at the Office of Health Economics (OHE), which he

joined in 2001. He spent 2005 at Farmaindustria, the Spanish pharmaceutical trade association. He

rejoined the OHE in 2006 as a senior economist, becoming Director of Consulting in July 2012. He is a

well-known economist in the economics of the life sciences industry, with more than 20 publications

on the subject, and is regularly invited to international conferences, both academic and more

commercially orientated. Mr Mestre-Ferrandiz has a PhD from the Universidad Autónoma de

Barcelona, is an honorary visiting lecturer in the Department of Economics at City University London

and is an honorary research fellow with RAND Europe.

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The Royal Institute of International Affairs Chatham House 10 St James’s Square, London SW1Y 4LE T +44 (0)20 7957 5700 F +44 (0)20 7957 5710 contact@chathamhouse.org www.chathamhouse.org Charity Registration Number: 208223

Big Innovation Centre Ergon House Horseferry Road London SW1P 2AL T +44 (0)20 3713 4036 h.lawrence@biginnovationcentre.com www.biginnovationcentre.com